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EXTRA DIVISION,
INNER HOUSE, COURT OF SESSION
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Lord Eassie
Lord Wheatley
Lord Marnoch
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[2008] CSIH 47
OPINION OF THE COURT
delivered by LORD EASSIE
in the cause
THOMAS RUDDY
Pursuer and Respondent
against
MONTE MARCO & OTHERS
Defenders and Reclaimers
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Act: Hajducki QC,
Lloyd; Anderson Strathern LLP
Alt: R Milligan; Anderson Fyfe LLP
25 July 2008
[1] Following a
proof in this action of reparation in respect of personal injuries the Lord
Ordinary, by interlocutor dated 7 March 2008, granted decree against the first
defender for payment of a sum of damages; he assoilzied the second
defenders. Against that interlocutor the
first defender has now reclaimed.
[2] The pursuer
and respondent sustained his injuries on 5 October 2002 when he was working in a warehouse
at 137 Shawbridge Street, Pollockshaws, Glasgow owned by the
second defenders. The first defender and
reclaimer was then, and at the time of the proof, a director of the second defenders. He and his wife were the only shareholders in
the second defenders. In July 2002
vandals had set fire to the roof of the warehouse, causing damage to a part of
the roof and significant smoke damage to the subjacent walls and flooring of
the relevant part of the warehouse. Over
the summer of 2002 the damage to the roof was repaired by a roofing
contractor. At some point in the early
Autumn of 2002 the first defender spoke to the pursuer and asked him to carry
out work at the warehouse, including cleaning and painting the walls, the
arrangement being that the pursuer would be paid a cash sum of £40 (or £50) per
day.
[3] At the proof
before the Lord Ordinary a number of issues were in contention. These included matters with which this
reclaiming motion is not concerned, such as the nature of the work upon which
the pursuer was engaged at the time; the circumstances of the accident; whether
he was instructed to do the task upon which he was apparently engaged at the
time of the accident; and whether, assuming him to be employed, fault could be
attributed to the employer. Another
issue was whether the pursuer was working as a self-employed contractor or was
working under a contract of employment.
In that latter event, there was then an issue as to whether the employer
was the first defender (as an individual) or the second defenders. The Lord Ordinary rejected the contention
that the pursuer was engaged as a self-employed contractor. No challenge is advanced as to the Lord
Ordinary's conclusions in that respect.
The only aspect of matters before the Lord Ordinary which is raised by
the first defender in this reclaiming motion is the attribution by the Lord
Ordinary of personal liability to the first defender as being the employer of
the pursuer in relation to the work in question.
[4] In
consequence of the serious injuries which he sustained the pursuer was unable
to give any meaningful evidence respecting either the circumstances of the
accident, or his engagement, or his previous work history. But evidence was led touching the last of
these matters from members of his family.
The facts found by the Lord Ordinary relating to, among others, all of
these matters are set out by the Lord Ordinary in his opinion http://www.scotcourts.gov.uk/opinions/2008csoh40.html. But for present purposes
we can summarize the facts relevant to the issue raised in the reclaiming
motion as is set out in the following five paragraphs.
[5] First,
the pursuer could not be said to be someone whose employment status was, or had
been, regular. The Lord Ordinary
summarizes the evidence thus in paragraph [17]:
"[17] Overall,
the impression created by all the evidence on this aspect was that the pursuer
was a person whose primary and regular income derived from state benefits, but
who would work casually from time to time as a painter, decorator or odd job
man to supplement his benefit. He would have worked for persons other than the
first defender or his companies, but the extent of that work is impossible to
gauge with any certainty. It was at best spasmodic. He would have been
concerned to conceal his casual engagements from the Benefits Agency and would
therefore not have worked for anything other than cash. He would not have
wanted his name to appear on any documentation; be it work records, job
schedules, invoices or receipts. He would not have wished to enter into the
PAYE scheme or to pay any National Insurance contributions."
[6] The first
defender was a director of a number of companies. As the Lord Ordinary notes in paragraph
[19] of his opinion, the pleadings for the pursuer aver that:
"The pursuer and the first defender
had known each other for a period of some ten years prior to the accident. They had an established relationship, whereby
the first defender would, from time to time, phone the purser, and engage him
to do work, for one or other of his various companies."
The Lord Ordinary goes on to say in that paragraph
that:
"The essence of the
pursuer's case on record is thus that he was engaged by the first defender, but
these engagements were to work for the first defender's companies."
It appears that of such employments only two
specific incidences were canvassed in the evidence. These were (a) general
maintenance work done by the pursuer at a plant operated by VP Packaging
Limited in Barrhead, where whisky and other drink related items were packaged;
and (b) work at a jewellery shop in the Pollock Centre operated by another company, Veyco
Limited.
[7] There
were no signs or other features at the warehouse in which the pursuer sustained
his accident to indicate that it was owned or occupied by the second
defenders. No trading or other activity
was being carried out in the relevant part of the warehouse.
[8] In
respect of his work at the warehouse, the pursuer was paid in cash by the first
defender on every Friday afternoon. But
the sums so paid were reimbursed to the first defender by cheques drawn on the
second defenders' bank account and the sums in question were entered into the
second defenders' accounting records and were included in the second defenders
profit and loss account under the entry "repairs and renewals" or "clean
up".
[9] The
charges invoiced by the roofing company for repairing the roof were invoiced to
and paid by the second defenders.
[10] The
arrangement whereby the pursuer was engaged to carry out the work at the
warehouse was entirely oral. In his
evidence to the Lord Ordinary the first defender maintained that he had offered
to pay the pursuer "through the books of the company" but, as in the past, the
pursuer had declined this. The first
defender also testified in his evidence that he had mentioned the second
defenders by name as being the company in question. The Lord Ordinary rejected those particular
aspects of the first defender's testimony as being not credible. In paragraph [46] of his opinion he says:-
"[46] The first defender's evidence that he told
the pursuer of the second defenders' involvement with the warehouse, or indeed
the involvement of any company in the warehouse, is rejected as not credible.
The same applies to his assertion that the pursuer would have known of this
involvement. There was nothing to inform the pursuer of this involvement. The
first defender may have offered to put the pursuer "through the
books" but, even if the pursuer might have thought that such an
arrangement would have involved him formally working for a limited company,
that arrangement was declined. There would have been little practical purpose
in the first defender mentioning the involvement of the second defenders,
unless he was actively thinking of potential legal pitfalls, which is not
likely. What the first defender was interested in doing was selling or leasing
the warehouse as soon as possible and achieving that by cleaning up the damage
caused by the fire as cheaply as possible. He was prepared to engage the
pursuer on a purely "off the record" cash basis, as was the pursuer
to reciprocate. The name or the existence of the second defenders would have
meant nothing to the pursuer. It is not at all likely in the context of such a
cash transaction that there would be any mention of a corporate entity. It was
a simple arrangement between the first defender and the pursuer. Under it, the
pursuer would not have looked to a corporate entity to pay his wages. He would
have looked to the first defender personally to do that and the first defender
did so. The first defender provided no documentation or other material to
advise the pursuer that he was contracting with anyone other than himself as an
individual. The pursuer's contract was with the first defender as such an
individual and not as an agent for a principal, disclosed or not. Looking at
all the circumstances of the arrangement, the pursuer was employed by the first
defender."
[11] While taking issue with the conclusions drawn by the Lord
Ordinary in the two concluding sentences of that paragraph, counsel for the
first defender did not seek to challenge the Lord Ordinary's rejection of the
first defender's testimony to the effect that he had made plain to the pursuer
when he asked him to do the work that he would be employed by the company and
that the company was the second defender.
However, counsel submitted that it was open to the first defender in
this reclaiming motion to challenge the inferences drawn by the Lord Ordinary
from the primary facts - in particular the Lord Ordinary's conclusion that the
pursuer was employed by the first defender as an individual. In that respect reference was made Benmax v Austin Motor Co Limited [1955]
AC370 per Lord Reid, 376; and to Barber v
Somerset County Council [2004] UKHL13 [2004] 1WLR 1089, per Lord Scott
of Foscote at para [11] ff.
[12] The key primary facts in question were submitted by counsel for
the first defender to be that (a) the warehouse premises were owned by the
second defenders; (b) the wages paid to the pursuer were provided by the second
defenders and included in their accounting records as part of the costs of the
repair of the warehouse; moreover the roofing costs invoiced by the roofing
contractor were invoiced to and paid by the second defenders; and (c)
previously, the pursuer had only been engaged by the first defender in his
capacity as an agent for one or other of the companies of which he was a
director. The Lord Ordinary had recorded
that the second defenders, having no active employees, had no employers'
liability insurance. But that was an
irrelevant factor. The proper conclusion
to draw from the primary facts was that in engaging the pursuer's services the
first defender was acting as an agent for the second defenders (agency being
admitted by the second defenders on their pleadings).
[13] Counsel for the reclaimer further submitted that in light of
those particular primary facts, and having regard to the averment (already
quoted) to the effect that previously the pursuer had done work for one or
other of the first defender's various companies, the pursuer knew, or ought to
have known, that when engaging him to work at the warehouse the first defender
was acting as agent for a company. In
that respect counsel also referred to the evidence given by the pursuer's wife,
Mrs Ruddy, recorded by the Lord Ordinary in paragraph [44] of his opinion to
the effect that her husband would be aware that the first defender operated a
number of companies which had premises in the city and that her husband would
be aware that the premises would be owned by those companies. Counsel for the first defender further
submitted that in those circumstances the proper inference to draw was that the
pursuer's contract of employment was with the second defenders and that the
first defender was not the individual employer with individual
responsibility.
[14] In support of that proposition counsel for the first defender
referred to Bowstead & Reynolds on
Agency (18th edition) article 97 (para 9 -001) and the succeeding
paragraphs of commentary on that article.
Article 97 sets out the general rule that -
"In the absence of other indications, when an agent
makes a contract, purporting to act solely on behalf of a disclosed principal,
whether identified or unidentified, he is not liable to the third party on
it. Nor can he sue the third party on
it."
Reference was also made to Armour v TL Duff & Co 1912 SC 120, 123; the "Santa Carina" [1977] 1 Lloyds LR 478, 481; and to Teheran - Europe Co Limited v ST Belton (Tractors) Limited [1968] 2QB
545 per Diplock LJ, 555. Further, in a
case in which the agent was a director of an incorporated company, it was
important to keep in mind the separate juristic personality of the company and
not to set it "at naught" by attributing a personal liability to the director -
cf Williams v Natural Life Limited [1998] 1 WLR 830 per Lord Steyn, 834 ff.
[15] In response Mr Hajducki, who appeared for the
pursuer and respondent submitted that the Lord Ordinary was entitled to come to
the conclusion which he reached. It was
important to recognise that the two identified previous engagements were very
different. Both involved the pursuer
working in a trading business, alongside other employees, where the name of the
trading company was known and displayed.
But as respects the activity in the warehouse, there was nothing to
disclose its ownership; and there were no other employees. What mattered was not the thinking of the
first defender, but what was shown to have been communicated to the pursuer. In that respect counsel referred to the
passage at 835F in the speech of Lord Steyn in Williams v Natural Life
Limited. At best for the first
defender, on the Lord Ordinary's undisputed findings, the first defender was acting
as an agent for an undisclosed principal, in which event it was clear that the
agent was personally liable. Counsel
referred in that connection to paragraph 29.8 in Walker on Obligations (3rd edition). Reference was also made to the preceding
paragraph, 29.7, discussing liability for a disclosed, but unidentified,
principal.
[16] As
respects the role of an appellate court respecting its ability to review findings
of fact, or of mixed fact and law, counsel for the pursuer referred
additionally to Lee Ting Sang v Chung Chi-Keung & Another [1990] 2 AC 374; Biogen Inc v Medeva Plc 1997 RPC 1 and Arrow Generics Limited v AKZO BV [2008] CSIH 31; 2008 SLT 589, at
paragraph [84].
[17] In
a response on this latter aspect of the argument counsel for the first defender
and reclaimer adverted us to R v H [2007] UKHL7, at paragraph
[107].
[18] In
our view, having regard to the relevant primary facts found by the
Lord Ordinary it is possible to accept the argument advanced on behalf of
the first defender and reclaimer that when engaging the pursuer to carry out
work on the warehouse the first defender was de facto acting as an agent for the second defenders, of whom he
was a director. The warehouse was owned
by the second defenders, so the first defender could obtain no direct personal
benefit from its repair (otherwise, of course, than indirectly through his
participation as a shareholder in the second defenders.) While the first defender may have paid the
pursuer cash from his wallet, those outlays were reimbursed to him by the
second defenders (by payments apparently made prior in date to the accident). The sums were duly put through the accounts of
the second defenders. The other repairs
on the warehouse executed by the roofing contractor were invoiced to and paid
by the second defenders. And, quantum valeat the second defenders
admit and agree the agency in question.
In our view the appropriate inference to be drawn from those primary
facts was that, as between the first defender and the second defenders, the
first defender was acting as agent, being a director of the company. The reclaimer's criticism of the Lord
Ordinary is directed towards the penultimate sentence of paragraph [46] of his opinion
in which the Lord Ordinary says-
"The pursuer's contract was with the first defender as
such an individual and not as an agent for a principal, disclosed or not."
To the extent that the Lord Ordinary
wholly excludes agency we think that criticism to have merit. But, in a question with the pursuer, the fact
that the first defender was de facto
acting as agent for the second defenders is, of course, not the end of
matters.
[19] Taking
the first defender thus to have been acting as agent of the second defenders,
the focus must then pass to the state of communication between the first
defender and the pursuer at the time at which the engagement to carry out the
work was concluded. As already
mentioned, the first defender deponed that he had specifically offered to put
the pursuer "through the books of the company" and had mentioned the second
defenders by name. The Lord Ordinary
rejected this evidence in paragraph [46] of his opinion, quoted above. In light of that rejection, and of what we
have said in the preceding paragraph of this opinion, it would follow that the
first defender was acting as agent for an undisclosed principal. It is not in doubt that an agent for an
undisclosed principal incurs liability to the third party with whom he
contracts unless the third party, on learning of the existence of the principal,
elects to hold the principal liable (cf Walker para 29.8). No question of election was said to have
arisen in the present case. So, as agent
for an undisclosed principal the first defender is yet subject to personal
liability.
[20] But
even if the circumstances of the prior relationships between the pursuer and
the first defender should have alerted the pursuer to the first defender's operating
a number of companies (cf the evidence of Mrs Ruddy to which reference has
already been made) and even if the pursuer might, on that account, have reason
to believe that the warehouse was owned by a company, the Lord Ordinary's
rejection of the first defender's evidence of his having told the pursuer
specifically of the second defenders means that, on this hypothesis, at best
for the first defender, he was acting on a disclosed agency but for an unidentified
principal.
[21] In
paragraph 29.7 of his work with the headnote "(ii) Agent acting for disclosed but unidentified principal" Professor
Walker states:
"Where an agent, having authority to
contract, does so, disclosing that he is acting for a principal but not
disclosing the latter's identity, the other party cannot rely on the latter's
credit and is entitled to sue the agent personally".
For this proposition, which, in its unqualified
terms, does not coincide with the general rule expressed in Bowstead and
Reynolds in article 97, the author cites various authorities not all of which
appear wholly to support the proposition in those categorical terms. However, the practical consideration that,
unless the principal is identified, (or readily identifiable from some public
register as in the case of Armour v T L Duff & Company) the
third party creditor cannot assess his worth, or indeed proceed against him,
and must therefore trust to the agent's credit is evident in some of those
authorities, particularly Dores v Horne and Rose [1842] 4 D 673
and in our view provides reason for thinking that as a matter of general, or prima
facie, rule the proposition is sound. Professor Wilson in his work The Scottish
Law of Debt, page 308 (to which it is acknowledged we were not referred)
says that :
"Where the agent has contracted expressly as agent
for a principal whose name is not disclosed, the position is not altogether
clear but it seems that the agent may be liable".
Among the authorities cited in the footnote to that
passage is Gloag on Contract (2nd edition) page 138 where
Gloag points out that where, as agent, someone sells a specific article the
purchaser must normally look to the owner, the unidentified principal, for
specific implement of that obligation. So
at least one aspect of the lack of clarity identified by Wilson appears to relate to that
specialty. We also note the discussion
on this topic in paragraphs 137 to 146 of the "Reissue" article on "Agency and
Mandate" by Laura Macgregor in the Stair Encyclopedia (to which we were also
not referred).
[22] In
any event we also observe that the commentary to article 97 of Bowstead and
Reynolds imports some qualification of the general rule stated in that article. In that commentary the authors state:-
"..the mere fact that a person acts as an agent and
is known to do so does not necessarily negate his involvement in the
transaction. It has more recently been
said that 'it is not the case that, if a principal is liable, his agent cannot
be. The true principle of law is that a
person is liable for his engagements (as for his torts) even though he acts for
another unless he can show that by the law of agency he is held to have
expressly or impliedly negatived his personal liability'"
[23] Preceding on the basis of such authority as
was cited to us, we have come to the view that even if the circumstances were
such that the pursuer might have appreciated, or even ought to have
appreciated, that the first defender was acting for one or other of his companies,
in other words, that he was acting for a disclosed but unidentified principal,
in order to escape personal liability the first defender had to show that he
expressly or impliedly negatived personal liability. In other words the circumstances required to
be such that, consonant with the thinking of Dores v Horne and Rose, and
also with Macgregor's preference (para 140) for the reliance on credit
approach, it was evident that the pursuer did not trust to the credit of the
first defender but to the credit of his unidentified principal.
[24] In
the factual circumstances found by the Lord Ordinary we do not consider that
this test is met. Since the Lord
Ordinary rejected the first defender's evidence of what he claimed to have
stated to the pursuer when engaging him to perform the work, the Lord
Ordinary's finding, in paragraph [46], that the pursuer would have looked to
the first defender personally to pay his wages cannot, in our view, be
challenged.
[25] Accordingly,
while we do not agree with the Lord Ordinary's opinion in so far as he appears
to have rejected the first defender's having acted as an agent for the second
defender (a finding which may have consequences as respects the first defender's
ability to obtain relief or reimbursement from the second defenders) we
conclude that in any question with the pursuer the Lord Ordinary reached a
correct result, given his findings on the evidence.
[26] For
those reasons, this reclaiming motion must be refused.
